Risk Assessment, Safety Assessment, and the Estimation of Regulatory Benefits

October 31, 2012

Since 1981, most federal operations are expected to conduct systematic regulatory impact analysis (RIAs) for their largest regulatory reform initiatives. The purpose of RIAs is to help inform agency heads and White House officials about the nature of the complexity the regulation is intended to solve, as well as the costs and benefits of a range of options, says Richard Belzer of the Mercatus Center.

The benefit-cost investigation is aimed to inform decision makers about the various effects of a range of potential alternatives. In most cases, the analyses depend on health risk assessment. However, in reality, the distinction between risk assessment and safety assessment has become opaque. The dilemma is when the decision makers cannot ascertain that the regulatory choices parallel their intention if they cannot distinguish where the analysis ends and the value judgment begins.

Risk assessment is the science-based practice of ascertaining what is expected to happen under what circumstances.

Risk management is the policy activity of deciding what, if anything, to do about it. It has long been a maxim in the field that a clear conceptual distinction between the assessment and management of risk should be established and maintained.

A true risk assessment provides a quantitative estimate for the probability of a specific health outcome associated with the varying degree of exposure to (or doses of) a chemical, physical or microbiological agent.

Safety assessments give a quantitative estimate of the amount of a substance people can be exposed to and still be considered safe. Ideally, assessments strive to identify the highest exposure that is safe. However, safety assessments are hard to garner because it involves numerous undisclosed value judgments concerning the definition of safety.

Value judgments, although important in the decision-making process, are not scientific, and neither is the concept of safety.

Accordingly, the line dividing risk assessment and risk management has become blurred.

Risk assessment is important for RIAs. Without them, it is not possible to estimate the benefits from regulation. Indeed, economists need objective estimates of risk. Unfortunately, conventional risk assessment methods rarely, if ever, produce objective estimates.

If risk assessment lacks objectivity because it understates risk, the resulting benefits estimate will understate the true benefits.

Conversely, if a risk assessment lacks objectivity because it overstates risk, benefits will be overstated.

Therefore, on every measure where scientific knowledge is uncertain, the purpose for conventional risk assessment is to make sure risk is not being understated.